Government Guarantees should not be allowed for creating direct liability / de-facto liability on the State.

Risk Categorization

1. (1) The Departments should classify the projects / activities as high risk, medium risk and low risk and assign appropriate risk weights before extending guarantees.
2. (2) Risk categorization should also take into consideration past record of defaults.
3. (3) Risk associated with guarantee proposal including the probability of future payouts should be thoroughly assessed by concerned Departments.